Asian shares slip, dollar pulls away from highs

Tuesday, 23 September 2014 00:01 - - {{hitsCtrl.values.hits}}

Reuters: Asian shares skidded on Monday as investors awaited data this week that could provide more evidence of a slowdown in China, while the dollar gave back a little of its recent gains.

China’s flash manufacturing PMI reading on Tuesday could come in below the 50 level, indicating that manufacturing activity is contracting. “The psychological effect of a below-50 reading will be significant and consistent with the slew of softer Chinese data over recent weeks,”Head of FX strategy Asia-Pacific for Barclays in Singapore, Mitul Kotecha said in a note to clients. China will not dramatically alter its economic policy because of any one economic indicator, Finance Minister Lou Jiwei said on Sunday, in remarks at a meeting of finance ministers and central bank chiefs from the Group of 20 nations who met in the Australian city of Cairns. His remarks came days after many economists lowered growth forecasts having seen the latest set of weak data. MSCI’s broadest index of Asia-Pacific shares outside Japan dropped 0.8%. Japan’s Nikkei stock average fell 0.7%, after it marked its highest closing level since 2007 on Friday, and gained 2.3% for the week.

Dollar sits back after record-breaking run higherReuters: Major currencies recovered some ground against the dollar on Monday after the dollar index racked up a 10th straight week of gains, its longest winning streak since its free float in 1973. Stock and currency markets were taking a breather after one of the most volatile and event-filled weeks in more than a year, but there is plenty of data and policymaker comment spread through this week for investors to get their teeth into. Top of the agenda for the euro is European Central Bank President Mario Draghi’s appearance in the European parliament, which follows a lukewarm take-up for the bank’s latest scheme to push more money through the financial system. If purchasing managers surveys on Tuesday point to more weakness in the euro zone economy, it will fuel speculation that Draghi will be forced to embark on the sort of outright money-printing to which US policymakers have just called a halt. “The dollar is now on a pretty strong footing, although after last week’s action we could be in for a bit of a lull,” European Head of Global Market Research at Bank of Tokyo Mitsubishi-UFJ in London, Derek Halpenny said. “We have a handful of Fed speakers and Draghi to go on, but I’m not sure any of that will be enough to push us much further this week.” BTM have the euro at $ 1.27 by the end of this year then falling to $ 1.20 next, underpinned by a widening gap in US and European market interest rates that reflect expectations the Federal Reserve will raise borrowing costs next year. “We’re quite happy with that fairly conservative end of year forecast because there is quite a lot priced into the dollar already,” Halpenny said. The euro traded just over 0.2% higher on the day at $ 1.2860 after touching a 14-month trough of $ 1.2826. The dollar index, a gauge of the greenback’s strength against a basket of major currencies, was down 0.15% 84.611 in early trade in Europe, just off a two-year high of 84.797 hit Friday. While sterling was around 0.4% higher at $1.6348, it has made little headway since Friday’s Scottish referendum result. Major political risks - including the fallout from Scotland’s vote to reject independence and next May’s general election in the United Kingdom - still lie ahead for the pound and other British assets. The yen also eked out some lost territory after slumping to a six-year low against the dollar late last week, although the gains were modest. There was little help from a weekend meeting of G20 finance ministers and bank chiefs in Cairns, Australia, where currencies got little mention. The G20 said they were close to adding an extra $ 2 trillion to the global economy and creating millions of new jobs, but Europe’s extended stagnation remained a major stumbling block.

Alibaba Group, in one of the biggest IPOs ever, ended up 38% at $ 93.89 on massive volume on Friday. Because the Chinese online retailer’s stock is traded on the New York Stock Exchange and is not an S&P 500 component, its gains were not reflected in major indexes and it did little to help an otherwise lacklustre day on Wall Street. The G20 leaders said they were close to adding an extra $ 2 trillion to the global economy and creating millions of new jobs, but Europe’s extended stagnation remained a major stumbling block. The dollar gave up 0.2% against a basket of major currencies to 84.600, after the index posted its 10th consecutive week of gains on expectations that US interest rates would rise more quickly than had been expected. The Federal Reserve should start raising US interest rates in the spring, earlier than many investors currently expect, and should do so both slowly and gradually, Dallas Federal Reserve Bank President Richard Fisher said in an interview on Fox Business Network on Friday. But the outlook for US monetary policy remains murky. The Fed issued a policy statement at the close of last week’s two-day meeting that suggested the first rate hike wasn’t due until around the middle of next year. The greenback eased about 0.2% against its Japanese counterpart to 108.85 yen, moving away from a six-year high of 109.46 yen scaled on Friday. The euro edged up 0.2% on the day to $ 1.2854, after earlier drifting down to touch a fresh 14-month low against the dollar of $ 1.2826.

Oil falls below $ 98 on sluggish demand, ample supply Reuters: Brent crude fell below $ 98 a barrel on Monday, dropping for the third session in four, as sluggish demand and ample supplies outweighed expectations of a cut in oil output from the Organisation of the Petroleum Exporting Countries (OPEC). Comments from OPEC’s secretary general last week that the group could cut output next year buoyed Brent, but investors’ attention turned back to the gloomy economic outlook in Europe and China, which has curbed oil demand. A cut in Libya’s oil output had limited impact on prices. November Brent was 67 cents lower at $ 97.72 a barrel by 8.35 a.m. US crude futures for October fell 50 cents to $ 91.91 a barrel, ahead of the contract’s expiry at the end of Monday. “Sentiment remains predominantly bearish given downbeat demand growth expectations and plentiful supplies,” Russian bank VTB Capital’s London-based oil and commodities strategist Andrey Kryuchenkov said. “However, I think the downside is limited,” he added. “The market is very sensitive to supply jitters, given that the risk premium is gone and judging by the reaction last week to a fresh outage in Libya and OPEC comments.” OPEC members, many of whom require oil prices at above $ 100 to meet budgetary needs, will review the organisation’s oil output policy at its next meeting on 27 November.

Sterling added 0.4% to $ 1.6351 after it soared on Friday following Scotland’s vote to reject independence. Spot gold shed 0.2% to $ 1,212.56. Last week, gold posted a 1% drop for its third consecutive weekly fall. Brent crude dropped 0.5% to $ 97.91 a barrel, while U.S. crude for October delivery, which expires later on Monday, fell about 0.3% to $ 92.13.